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1916 Supreme(SC) 61
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BUCKMASTER L.C., LORD ATKINSON, AND SIR JOHN EDGE.
JHANDA SINGH - Appellant
Versus
WAHID-UD-DIN - Respondents
On appeal from the High Court at Allahabad.
Decided On : July. 27. 1916.
Solicitors for appellant:Barrow, Rogers & Nevill. Solicitor for respondents: Douglas Grant.
An absolute conveyance does not become a mortgage simply because the vendor has a right to repurchase. Such a transaction is an absolute sale unless the documents and circumstances establish a debtor-creditor relationship, and conditions restricting the source of redemption funds are inconsistent with a mortgage.
Headnote:(A) Mahomedan Law; Bengal Regulations I of 1798 and XVII of 1806 - Mortgage by conditional sale (bai-bil-wafa) - Determination of intention - Whether an absolute deed of sale coupled with a separate agreement for repurchase constitutes a mortgage or an absolute sale - Intention must be gathered from the language of the documents viewed in light of surrounding circumstances. (Paras 10, 11)
(B) Right of Redemption - A stipulation that the purchase money must be paid "out of the pocket" of the vendors, without mortgaging or selling other property, is inconsistent with the relationship of mortgagor and mortgagee, as it encroaches upon the mortgagor's right to redeem the property from any source. (Para 15)
(C) Absolute Conveyance - Prima facie, an absolute conveyance that does not indicate a debtor-creditor relationship does not become a mortgage merely because the vendor stipulates a right to repurchase. (Para 21)
Facts of the case:
The predecessors of the parties executed an absolute deed of sale for a village. A subsequent agreement provided that if the vendors repaid the purchase price within nine to ten years from their own funds, the purchasers would execute a fresh sale deed. A separate bond for a loan with interest was also executed on the date of the sale. A suit for redemption was instituted several decades after the stipulated period for repurchase had expired.
Findings of Court:
The documents constituted an absolute sale with a contract for repurchase and not a mortgage by conditional sale.
Issues: Whether a deed of sale and a subsequent agreement for repurchase, when taken together, constitute a mortgage by conditional sale (bai-bil-wafa) or an absolute sale with a contract for repurchase.
Ratio Decidendi: The court reasoned that the sale deed was absolute on its face and did not refer to any repurchase agreement. The condition that payment be made from the vendors' own funds was contrary to the nature of a mortgage. Furthermore, the existence of a separate interest-bearing loan bond indicated that the parties did not intend to conceal a loan through a conditional sale. A right to repurchase does not convert an absolute conveyance into a mortgage unless a debtor-creditor relationship is established.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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property law
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transfer of property
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sale
- contract for repurchase
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mortgages
- mortgage by conditional sale
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sale
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transfer of property
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practice and procedure
- interpretation of documents
Judgement
Appeal from a judgment and decree of the High Court (March 11, 1911) affirming a judgment of the additional Judge of Meerut. The appellant and other plaintiffs in 1907 instituted a suit for redemption of a village on payment of Rs. 5500. They contended that an absolute deed of sale of the village for Rs. 5500 executed by their predecessors in title on August 29, 1852, and an agreement executed on September 5, 1852, by the purchasers (predecessors in title of the defendants) for a resale to the vendors together constituted a usufructuary mortgage. The agreement, after reciting the sale, provided as follows " As we, the executants, are now willing to help and treat with kindness the vendors, we, the executants, with our own free will, do hereby covenant and give it in writing, that if the aforesaid vendors, after the lapse of nine to ten years, from the date of the execution of the aforesaid sale-deed, do pay to us the purchase-money as entered in the sale-deed, i.e., the sum of Rs. 5500, out of their own pocket without mortgaging or selling their property to other persons, we shall
forthwith execute a fresh sale-deed, on receipt of the sale consideration entered in this document, and get mutation of names effected in the Revenue papers. We shall never deviate from what we have agreed upon. In the event of our refusal, they have power to deposit into the treasury attached to the Court, the amount of consideration entered in the sale-deed ; and after the institution of a suit in Court to purchase their property again. Further, if the aforesaid persons be not ready to purchase the property and to pay the purchase-money within the aforesaid time, they shall have no claim to the property after the expiry of the period of ten years. At any rate, we shall then have every power in respect of the aforesaid property."
The vendors presented the deed of sale for registration on May 18, 1853, and the vendees presented the agreement for registration on May 19, 1853 ; after registration the deeds were exchanged between the parties and mutation of names effected.
The additional Judge held that the transaction was not a mortgage and dismissed the suit.
On appeal to the High Court, Sir John Stanley C.J. held that the decision of the additional Judge was right, but Banerji J. came to the opposite conclusion.
Upon a further appeal under the letters patent, heard by Richards, Griffin, and Tudball JJ., the decision of the additional Judge was unanimously affirmed. The judgments in the High Court are reported at I.
L. R. 33 Allah. 585.
1916. July 17. Dube, for the appellant. The deed of sale and the agreement together constituted a bai-bil-wafa, or mortgage by conditional sale Balkishen Das v. Legge. (L. R. 27 Ind. Ap. 58.) A conveyance with a separate agreement for repurchase is a common form of mortgage where one of the parties is a Mahomedan, and that form of mortgage was for a long time followed in the North-Western Provinces Ali Ahmad v. Rahamat-Ullah . (( 1892) I. L. R. 14 Allah. 195.) The provision for a deposit in Court is similar to that prescribed by the Bengal Regulations in the case of a bai-bil-wafa mortgage, and is strong evidence of the intention of the parties. Although the documents do not bear the same date they were not exchanged till after both had been registered. The decision in Bhagwan Sahai v. Bhagwan Din (( 1890) L. R. 17 Ind. Ap. 98.) is distinguishable.
De Gruyther, K.C., and Dunne, for the respondents, were not called upon.
July 27, The judgment of their Lordships was delivered by
LORD ATKINSON. This is an appeal from a judgment and decree dated March 11, 1911, of the High Court of Judicature for the North-Western Provinces, affirming the decree dated March 27, 1908, of the additional Judge for Meerut.
The question for decision is whether two instruments in writing, the first a deed dated August 29, 1852, executed by the appellants predecessors in title, and the second an agreement dated September 5, 1852, exec
